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Michael Porter to New Carolina: SC Per Capita Low Because We've Been Buffalo Hunting for Decades

Submitted by: John Warner on Sep 29, 2011 at 2:17 am Tagged with: Economic Development Source: New Carolina

Harvard Business School Professor Michael Porter spoke to New Carolina's Seven Year Celebration. After studying over 100 initiatives similar to New Carolina around the world, he said there is no doubt that economic strategies to grow deep industry clusters create:

• faster job growth,
• higher wages,
• higher patenting rates, and
• faster new business formation, growth and survival.

To raise per capita income a community must increase productivity. The issue we should be most concerned with is how productive we are relative to other locations globally that we compete with. Productivity is driven by:

• the quality of the overall business environment
• cluster development, and
• close collaboration between government, education, and the private sector.

Isolated firms in isolated places can not be highly productive. The state must help create an environment where everyone is incented to drive productivity. The state must also help ensure that the market works for everyone, so rising prosperity benefits everyone and no one gets left behind.

Dr. Porter said what is remarkable about New Carolina is the shear determination of those involved to make it work and change the vocabulary in the state. He said New Carolina was one of only five out of hundreds of cluster initiatives in the world led by the private sector. He is so impressed with New Carolina's progress that he is writing a Harvard Business Case on New Carolina that he will use to teach cluster principles worldwide.

The bad news for South Carolina is we are digging out of a hole decades in the making of uncoordinated buffalo hunting. States with high per capita income tend to participate in few cluster but lead the world in those where they are the strongest. South Carolina, on the other hand, participates in lots of industries, but we're the market leaders in almost nothing, with the exception of textiles and chemical production. As a result, we have not experienced the same acceleration of productivity increases and job and earnings growth that more focused areas have experienced.

Dr. Porter said he had learned several things from his involved with New Carolina:

• connecting the dots is more important than he first thought,
• cluster development can not be driven from the top, but must he highly collaborative, and
• we should continue industrial recruiting where it builds cluster strength, not in the old, buffalo hunting way.